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THE OBAMA ADMINISTRATION'S TOXIC-ASSET CLEAN-UP plan could do more than help America's banks: It could produce some attractive returns for your portfolio.

A bevy of money-management firms are rolling out funds that aim to let individual and institutional investors profit by investing in bonds likely to get a kicker from the cleanup. And if you think the program will broadly help the financial sector, you may want to consider an equity fund.

The administration recently announced a plan to team up with private investment outfits to buy subprime mortgages and other bad assets weighing on banks. If the program improves the markets for those assets, as expected, funds investing in them could reap handsome returns.

Invesco's PowerShares, for one, is slated to launch two actively managed exchange-traded funds -- both targeting securities backed by mortgages that weren't written to the standards of mortgage agencies Fannie Mae and Freddie Mac. The Alt-A Non-Agency RMBS Opportunity fund and the Prime Non-Agency RMBS Opportunity fund are now wending their way through Securities and Exchange Commission review and could be up and running within a few months.

Gross, who has sought to "shake hands with Uncle Sam," summed up his mantra in a recent note: "Anticipate, then buy what they buy, only do it first: agency-backed mortgages, bank preferred stocks, and senior bank debt; Aaa asset-backed securities such as credit-card, student-loan, and auto-receivables."

As of late last year, Gross had built up a 60% position in mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac, Jones points out, while also increasing debt of financial-services firms to 25% of holdings and building muni bonds to a 5% position. The fund has returned an annualized 6.65% over the past three years.

"They're really a good fund group, with bright managers," Jones says. "It's just that they stubbed their toe when subprime presumably looked attractive around the Bear Stearns period and thereafter, before 2008 turned for the worse."

BlackRock, expected to be one of five managers hired by Treasury to raise money from private investors to buy toxic assets, is upbeat about the likely interest from big investors like endowments and pension funds.

"The funds that are going to be raised we think will be attractive opportunities for investors -- to get involved in some of these markets that have been very broken," says Curtis Arledge, BlackRock's co-head of U.S. fixed income.

BlackRock has found an increasing appetite for risk. Weeks before the Treasury's announcement, it raised $308 million for its non-listed, closed-end Fixed Income Value Opportunities fund, targeting distressed assets. The fund aims to return 8% to 10%, and has a $25,000 minimum investment that must stay in the fund for six years.

On the equity side, meanwhile, "financial funds will be among the first to feel any turnaround," says Morningstar analyst Harry Milling. He suggests the T. Rowe Price Financial Services fund (PRISX), which aims to spread risk over its 75 holdings. Fund manager Jeff Arricale targets many sectors, from insurance to regional and money-center banks, but wants to hold "the best in class in each -- the survivors," Milling says.

For all the hubbub about the Obama administration's plans, not everyone is jumping on the bandwagon. Milwaukee-based Baird Funds looks on the Treasury's recent programs with cautious optimism. The public-private toxic asset buyout plan "has the potential to change the economics for distressed securities," says Chief Investment Officer Mary Ellen Stanek, but she and her team see some irony in the fact that leverage plays a large part in the solution. "Those of us on the bond side have big questions about the implementation's success."